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MarketScreener Homepage  >  Equities  >  KOREA EXCHANGE  >  Samsung SDI Co Ltd    A006400   KR7006400006

SAMSUNG SDI CO LTD

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AB Volvo warns of demand slump as truck orders plunge

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10/18/2019 | 05:14am EST
Logo of Swedish automobile manufacturer Volvo is seen at Stierli Automobile AG company in St. Erhard

STOCKHOLM (Reuters) - Swedish truckmaker AB Volvo reported a sharp decline in third-quarter orders and forecast a demand slump on both sides of the North Atlantic next year, taking the shine off forecast-beating earnings.

After years of strong demand, signs of a slowdown in commercial vehicles markets that have always been prone to violent cyclical swings have become increasingly apparent in recent months amid concern over international trade and the global economy.

The world's second-largest truckmaker behind Daimler said orders for its trucks, including brands such as Mack and Renault, fell 45% from the same quarter last year. Several analysts had forecast a drop of slightly more than 30%.

Chief Executive Martin Lundstedt told a news conference that AB Volvo is well prepared for what he described as an expected correction in its main markets.

Lundstedt said the Gothenburg-based company had reduced production volumes over the past quarter and would make further adjustments over coming quarters in light of declining orders.

Handelsbanken analyst Hampus Engellau said that while earnings and sales were good, the focus is on order intake.

Shares in AB Volvo fell 1.8% by 0904 GMT, having dropped 7% over the six months before Friday's results as investors increasingly priced in a market downturn. Rival Traton, Volkswagen's recently listed truck manufacturer, was down 1.9% in Frankfurt.

"Truck order intake was on the weak side, 17% below our estimate and 20% below consensus," brokerage Pareto said in a note, forecasting downgrades to consensus estimates.

2020 DOWNTURN

Volvo, which also makes construction equipment, buses and engines, said it expects the market for heavy trucks to shrink by about 14% in Europe and 29% in North America next year as customers hold back on investment in the face of economic uncertainty.

Ahead of the results, analysts at Citi predicted that Volvo would forecast a truck market decline of a little more than 11% for Europe and about 25% for North America, the two markets that still generate most of the group's profit.

With lag time between deliveries and orders, Volvo's operating profit rose to 10.9 billion Swedish crowns ($1.12 billion) from 10.2 billion crowns a year ago. Analysts had forecast 10 billion crowns on average, Refinitiv data shows.

The slowing markets will prove a test for former Scania boss Lundstedt and his moves to make Volvo a nimbler organisation better able to sustain profitability over the course of a business cycle.

"For 2020, we expect markets to come down to more normal replacement levels in both Europe and North America, which we have prepared ourselves for," Lundstedt said.

While contending with wobbly markets, truckmakers also face challenges posed by a shift towards electric and self-driving vehicles, including the required spending on research and development.

Volvo, which has teamed up with Samsung to develop battery packs and with Nvidia Corp on artificial intelligence for self-driving trucks, announced separately that it is creating a new business area to house its work on autonomous vehicles.

"We have experienced a significant increase in inquiries from customers," Lundstedt said. "It is a logical next step."

(Reporting by Niklas Pollard and Johannes Hellstrom; Editing by Clarence Fernandez and David Goodman)

By Niklas Pollard and Johannes Hellstrom

Stocks mentioned in the article
ChangeLast1st jan.
NVIDIA CORPORATION -2.02% 207.99 Delayed Quote.55.80%
SAMSUNG SDI CO LTD End-of-day quote.
TRATON SE 0.20% 24.94 Delayed Quote.0.00%
VOLKSWAGEN AG 0.78% 177.32 Delayed Quote.27.64%
VOLVO -0.84% 148.05 Delayed Quote.27.68%
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Financials (KRW)
Sales 2019 10 200 B
EBIT 2019 480 B
Net income 2019 542 B
Debt 2019 2 473 B
Yield 2019 0,41%
P/E ratio 2019 30,9x
P/E ratio 2020 15,8x
EV / Sales2019 1 521x
EV / Sales2020 1 242x
Capitalization 15 508 B
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 31
Average target price 292 645,16  KRW
Last Close Price 242 500,00  KRW
Spread / Highest target 48,5%
Spread / Average Target 20,7%
Spread / Lowest Target -25,8%
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